Income Tax Appellate Tribunal - Ahmedabad
Manish Organics India Ltd., Ahmedabad vs Department Of Income Tax on 24 November, 2011
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A" AHMEDABAD
Before S/Shri D.K.Tyagi, JM and A. Mohan Alankamony, AM.
ITA No.2155/Ahd/2010
Asst. Year :1994-95
Asstt. CIT, Range-4, Vs. Manish Organics
Ahmedabad. India Ltd.,7-A,
Ratnam Sheth, C.G.
Road, Ahmedabad.
(Appellant) (Respondent)
..
Appellant by :- Shri A. K. Patel, Sr.DR
Respondent by:- Shri Sunil Talati, AR
Date of hearing : 24/11/2011
Date of pronouncement : 30/11/11.
ORDER
Per D. K. Tyagi, Judicial Member.
This is an appeal filed by the Revenue against the order of ld. CIT(A) dated 15.03.2010.
2. The effective ground raised in this appeal is regarding deletion of penalty of Rs.6,29,093/- levied u/s 271(1)(c) of the Act. The facts of the case are that the AO levied penalty mentioning that in the assessment order the AO made addition on various issues out of which following two additions have been sustained by the CIT(A) and Hon'ble ITAT: ITA No.2155/Ahd/2010
Asst. Year 1994-95
1. Inter corporate deposits and interest thereon Rs.12,91,500/-
2. Sales Commission Rs. 53,010/-
3. Factory Miscellaneous expenses Rs. 23,084/-
----------------------
Rs.13,67,594/-
Mentioning the decisions of Hon'ble Allahabad High Court in the case of Banaras Textorium vs. CIT (1988) 169 ITR 782 and in the case of Zeekoo Shoe Factory vs. CIT (1981) 127 ITR 827 and the decision of Hon'ble Gujarat High Court in the case of Jamnadas & Co. vs. CIT (1994) 210 ITR 218 the AO held that the assessee has furnished inaccurate particulars of income. He, therefore, levied penalty on the additions sustained of Rs.13,67,594/- on the tax worked out thereon. The AO levied minimum penalty of Rs.6,29,093/-. The assessee went in appeal before the first appellate authority wherein the ld. authorized representative vide written submission submitted as under :-
"Further to the statement of facts and grounds of appeal your appellant respectfully submits that the order passed by the ld. AO suffers from vice of application of mind as stated in ground no.1 since before the ld. AO passed the order on 29.01.2009 the reply to show cause notice was already furnished, a copy of which is enclosed herewith as Exhibit-A. It was explained in the said reply that all the particulars were duly furnished in the audited accounts and there was no concealment nor furnishing of inaccurate particulars of income. In this connection your appellant relies upon the decision of Hon'ble Gujarat High Court in the case of CIT vs. Scientific Chemicals (2005) 198 CTR (Guj) 661, a copy of which is enclosed herewith as Exhibit-B, wherein the High Court has held that when an explanation to show cause has been furnished and the same is not considered by holding that no explanation is furnished the order of penalty suffers from lack of application of mind and is liable to be quashed. The penalty be cancelled now.2 ITA No.2155/Ahd/2010
Asst. Year 1994-95 It is further submitted that the AO has disallowed commission payment on the ground that details of services and confirmations are not available. The CIT(A) granted partial relief and for the balance addition sustained the ITAT did not grant relief on the ground that no further fresh evidences have been furnished by the assessee.
Similarly, the second addition was of Factory Miscellaneous expenses. These were also disallowed on the ground of inadequate proof and evidences. It is submitted that books of accounts are subject to Internal Audit, Statutory and Tax audit. For all expenses there are always possibility of full details and evidences are not available or preserved. But merely because of that if the AO disallowed some small expenditure of such a big Public Limited Company, the addition automatically cannot result into a view that the assessee has concealed the particulars of income or has submitted inadequate particulars.
So far as Inter-corporate deposits and interest are concerned, it is submitted that it is a public limited company and deposits of crores of rupees were received every year u/s 58A of the Companies Act. Merely because Company Law department and Accounts department of the company were not meticulous to obtain full details of depositors it cannot be added as unexplained cash credit of the company. However, by virtue of strict interpretation of section 68, non-submission of certain details by depositors, it could be a case for addition u/s 68 but it cannot be a ground for levy of penalty inasmuch as the assessee had submitted all the details and deposits are not accepted by the Management but but staff as a public limited company.
At it is held by Gujarat High Court in the case of National Textiles vs. CIT (2000) 249 ITR 125 and consistently followed by Tribunals, merely because additions are made u/s 68 and sustained penalty cannot be levied. Copy of decision is enclosed.
However, simply because an addition has been made and confirmed, it cannot tantamount to furnishing of inaccurate particulars of income. For the sake of repetition, it is submitted that the accounts of the appellant were duly audited and tax audited and no such discrepancy was ever pointed out by the Auditor. The ld. AO has simply listed out some of the case laws which are not relevant and applicable to the facts of the case and it appears that in the reasons the ld. AO has simply stated that the additions having been confirmed and in view of the paragraphs extracted from the judgment he was satisfied that inaccurate particulars of income 3 ITA No.2155/Ahd/2010 Asst. Year 1994-95 were furnished. In doing so he has ignored the detailed explanation given in reply to show cause notice by holding that the assessee has failed to submit any reply. The penalty thus levied is without application of mind and simply because addition has been made, the same is levied. The same deserves to be cancelled and the same be cancelled.
The ld. AO has relied upon the decision of the Supreme Court in the case of Union of India vs. Dharmendra Textile Processors 166 Taxman 65 (SC) by holding that penalty is civil liability and willful concealment is not an essential ingredient as is case in matter of prosecution and that addition made will be followed by penalty. However, the ld. AO has failed to appreciate that in view of Explanation (1) to section 271(1)(c), when the assessee has submitted a plausible explanation and his bona fides by carrying the issue of disallowance right upto the Tribunal, it was not a fit case for levy of penalty. It be so held now. It may also be stated that the decision of the Supreme Court in the case of Dharmendra Textile Processors has been later explained by the Supreme Court in the case of Union of India vs. Rajasthan Spinning and Weaving Mills Ltd. (2009) 224 CTR (SC) 1, copy enclosed and also in the following cases.
(i) ACIT vs. VIP Industries (2009) 21 DTR (Mum. Tribunal) 153
(ii) Kanbay Software India (P) Ltd. vs. DCIT (2009) 22 STR (Pune) trib) 481
(iii) Addl.CIT vs. Premchand Gard (2009) 123 TTJ (Delhi)(T.M.)
433.
(iv) CIT vs. Siddharth Enterprise ITA 908/P &H dated 14th July 2009 copy enclosed.
Considering the entirety of the facts of the case and in view of the continuous legal proceedings after lapse of as many as 15 years when heavy losses were incurred, there could be no imaginable intention to conceal any income or furnishing any inaccurate particulars of income. In view of the facts of your appellant's case and the decisions clarifying the latest position, the penalty of huge amount of Rs.6,29,093/- be deleted."
The ld. CIT(A) considering the facts and circumstances of the case as also the submissions of the assessee deleted the penalty holding that the assessee is a public limited company and is accepting deposit in large 4 ITA No.2155/Ahd/2010 Asst. Year 1994-95 number from public. If the assessee fails to produce some of the depositors to prove the genuineness and creditworthiness inspite of the efforts made it may result into addition u/s 68 but it cannot lead to penalty for furnishing inaccurate particulars of income.
Aggrieved, the Revenue is in appeal before us.
3. The ld. DR relied on the penalty order and submitted that penalty u/s 271(1)(c) is civil liability and for attracting such civil liability, willful concealment is not an essential ingredient as is case in matter of prosecution u/s 276C -Union of India vs. Dharamendra Textile Processors (supra). Any concealment or inaccuracy in the particulars of income in the return occurring at any stage upto and inclusive of the ultimate stage of working out of total income would attract the penalty provision of section 271(1)(c). Every figure in the return which is set opposite to the item of income is a particular income, whether the figure is one of which is stated independently of any thing else that appears in the return or the documents accompanying it or whether it is something derived from other figures elsewhere stated in such return or documents. False result may be produced by the falsity of one or more of the constituent items in the return. The words 'inaccurate particulars' would cover falsity in the final figure as also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect 5 ITA No.2155/Ahd/2010 Asst. Year 1994-95 whether in the constituent or subordinate items of some or the end result. The AO was satisfied that assessee had furnished inaccurate particulars of income in respect of the issues discussed in the assessment order and confirmed by the judgments of CIT(A) and the Tribunal and it is a fit case for levy of penalty under section 271(1)(c). Therefore, the penalty in respect of the income sought to be evaded was rightly levied and the ld. CIT(A) is not correct in deleting the same. The ld. DR prayed that the order of ld. CIT(A) be set aside and that of the AO be restored.
4. The ld. counsel of the assessee heavily relied on the order of ld. CIT(A) and reiterated the submissions made before the first appellate authority. He submitted that ld. CIT(A) has correctly appreciated the facts of the case and deleted the penalty. His order may kindly be upheld.
5. We have considered the rival submissions and perused the material on record. The undisputed fact is that the assessee is a Public Limited Company having huge turnover but suffering losses and has ultimately been closed down. The net loss returned is Rs.59,54,460/- and there was no intention to reduce any taxable income. Even after additions the assessed income remained a loss. The accounts are subject to Internal Audit, Statutory Audit and Tax Audit. The AO has levied penalty on the additions Rs.13,67,594/- sustained by the appellate authorities on the tax worked out thereon. The AO levied minimum penalty of Rs.6,29,093/-. 6 ITA No.2155/Ahd/2010 Asst. Year 1994-95 This is a case where explanation of the assessee has not been accepted by the Department. The levy of penalty is merely on disallowance of expenditure and not finding of concealment of any particulars or mala fide intention to reduce the taxable income. The Hon'ble Gujarat High Court in the case of National Textiles vs. CIT 249 ITR 125 has held that provisions of section 68 permits the AO to treat unexplained cash credits as income for making certain additions if there is failure by the assessee to give an explanation. However, the addition made on this count automatically cannot justify the penalty levied u/s 271(1)(c). Hon'ble High Court further held that for levy of penalty u/s 271(1)(c) two factors must co-exist -(i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation -1 to section 271(1)(c) has no bearing on factor no.1 but has a bearing only on factor no.2. The explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with 7 ITA No.2155/Ahd/2010 Asst. Year 1994-95 the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. This case is also covered by the decision of the Tribunal, Ahmedabad in the case of ACIT vs. Excel Forging (P) Ltd. in ITA No.1709/Ahd/2005 dated 26.12.2008 wherein it has been held that non- availability of confirmation and other details are valid points for making addition u/s 68. But because the explanation of the assessee with regard to the genuineness of deposits is not accepted, it cannot straight away result into penalty. In the present case the assessee is a public limited company accepting deposit in large number from public. The assessee failed to produce some of the depositors to prove the genuineness and creditworthiness inspite of the efforts made, it resulted into addition u/s 68 but it cannot lead to penalty for furnishing inaccurate particulars of income. Therefore, in our considered opinion the ld. CIT(A) has rightly deleted the penalty. There is no infirmity in his order. We uphold the same. The appeal filed by the Revenue is dismissed.
8 ITA No.2155/Ahd/2010 Asst. Year 1994-95
6. In the result, the appeal filed by the Revenue is dismissed. Order was pronounced in open Court on 30.11.11.
Sd/- Sd/-
(A. Mohan Alankamony) (D.K. Tyagi)
Accountant Member Judicial Member
Ahmedabad,
Mahata/-
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
1.Date of dictation 28/11/2010.
2.Date on which the typed draft is placed before the Dictating Member................Other Member 28/11/2011
3.Date on which the approved draft comes to the Sr.P.S./P.S.............
4.Date on which the fair order is placed before the Dictating Member for pronouncement..............
5.Date on which the fair order comes back to the Sr.P.S./P.S...............
6.Date on which the file goes to the Bench Clerk...........
7.Date on which the file goes to the Head Clerk.............
8.The date on which the file goes to the Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................
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